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RECEIPT  AND  INVESTMENT 


GENEVA  AWARD  MONEY. 


RECEIPT  AND  INVESTMENT 


GENEVA  AWARD  MONEY. 


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Annex 

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RECEIPT  AND  INVESTMENT 

OF   THE 

GENEVA  AWARD  MONEY. 


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WASHINGTON,  June  17, 1882. 

Mr  DEAR  JUDGE  :  By  the  terms  of  the  award  of  the  Tribunal  of  Arbi- 
tration at  Geneva,  and  in  conformity  with  the  provisions  of  the  seventh 
article  of  the  Treaty  of  Washington,  the  Government  of  Great  Britain, 
in  1873,  was  required  to  pay  to  our  Government,  in  gold  coin,  at  Wash- 
ington, the  sum  of  fifteen  and  a  half  million  dollars.  The  duty  of 
receiving  this  large  amount  of  coin  into  the  Treasury,  and  investing  it 
in  bonds,  without  deranging  the  business  of  the  country,  fell  to  you  as 
Secretary  of  the  Treasury. 

You  were  kind  enough  in  a  late  conversation  to  explain  to  me  how 
you  solved  the  problem.  The  public  have  a  right  to  be  told  this,  now 
that  the  Geneva  award  has  passed  into  history.  If  you  see  no  objec- 
tion, and  can  command  the  leisure  to  give  me  the  details,  I  beg  you  to 
do  so  in  the  form  of  a  reply  to  this  note. 

I  am  preparing  for  publication  a  brief  survey  of  the  legislation  of 
Congress  providing  for  the  distribution  of  the  proceeds  of  the  award.* 
An  explanation  from  you  as  to  how  the  transfer  of  the  money  was 
effected  will  be  of  interest  to  the  public,  and  will  preserve  in  an  au- 
thentic form  the  details  of  an  important  historical  event. 
I  am  cordially  yours, 

FRANK  W.  HACKETT. 

Hon.  WM.  A.  RICHARDSON, 

Qourt  of  Claims. 


CHAMBERS  OF  THE  COURT  OF  CLAIMS, 

Washington,  D.  C.,  June  22,  1882. 

MY  DEAR  SIR  :  The  circumstances  connected  with  the  payment  of 
the  Geneva  award  by  Great  Britain  to  the  United  States  and  the  in- 
vestment of  the  money  received,  about  which  you  inquire  in  your  letter 

*Mr.  Hackett's  volume,  entitled  "The  Geneva  Award  Acts,  with  notes  and  refer- 
ences to  Decisions  of  the  Court  of  Commissioners  of  Alabama  Claims,"  is  published 
by  Little,  Brown  &  Co.,  Boston,  Mass. 


of  the  17th  instant,  are  quite  fresh  in  my  memory,  although  they  took 
place  nearly  nine  years  ago.  The  importance  of  the  transaction,  and 
the  interest  manifested  by  the  public  at  the  time,  as  to  how  the  transfer 
from  London  to  Washington  of  $15,500,000  in  gold  coin,  weighing 
more  than  twenty-eight  and  a  half  tons,  was  to  be  accomplished,  and 
its  probable  effect  upon  business,  served  to  impress  the  details  upon 
my  mind. 

It  was  provided  by  the  treaty  that,  "In  case  the  tribunal  find  that 
Great  Britain  has  failed  to  fulfil  any  duty  or  duties  as  aforesaid,  it 
[the  tribunal]  may,  if  it  think  proper,  proceed  to  award  a  sum  in  gross 
to  be  paid  by  Great  Britain  to  the  United  States  for  all  the  claims  re- 
ferred to  it;  and  in  such  case  the  gross  sum  so  awarded  shall  be  paid 
in  coin  fty  the  Government  of  Great  Britain  to  the  Government  of  the 
United  States,  at  Washington,  within  twelve  mouths  after  the  date  of 
the  award."  (17  Stat.  at  Large,  866.) 

In  September,  1872,  the  Arbitrators  awarded  "  to  the  United  States 
a  sum  of  $15,500,000  in  gold,  as  the  indemnity  to  be  paid  by  Great 
Britain  to  the  United  States,  for  the  satisfaction  of  all  the  claims  re- 
ferred to  the  consideration  of  the  tribunal,  conformably  to  the  pro- 
visions contained  in  Article  VII  of  the  aforesaid  treaty." 

The  amount  awarded  became  payable  in  September,  1873.  By  act 
of  March  3,  1873,  (17  Stat.  at  Large,  601,)  Congress  provided  that "  im- 
mediately upon  the  payment  of  the  sum  of  money  awarded  to  the 
United  States  by  the  Tribunal  of  Arbitration  at  Geneva,  to  be  paid  by 
the  Government  of  Great  Britain,  the  same  shall  be  paid  into  the 
Treasury,  and  used  to  redeem,  so  far  as  it  may,  the  public  debt  of  the 
United  States.  And  the  amount  equal  to  the  debt  so  redeemed  shall 
be  inA'ested  in  the  five  per  cent,  registered  bonds  of  the  United  States 
to  be  held  subject  to  the  future  disposition  of  Congress." 

During  the  spring  and  summer  of  that  year,  there  was  manifested 
through  the  public  press,  and  otherwise,  much  anxiety  among  the 
bankers  and  business  men  of  the  country,  especially  in  the  great 
financial  and  commercial  centre,  New  York  city,  lest  the  transfer  at 
one  time  of  so  large  an  amount  of  gold  might  seriously  affect  and  dis- 
turb, temporarily,  the  exchanges  and  other  business  relations  between 
this  country  and  Europe.  To  avoid  this  anticipated  difficulty  was  a 
matter  of  serious  consideration.  A  plan  was  adopted  and  successfully 
carried  out,  through  which  the  whole  amount  was  paid  and  invested 
without  making  the  slightest  impression  upon  the  money  market  or 
the  business  of  either  of  the  two  countries  concerned,  for  a  single  day. 

At  that  time  the  Treasury  Department  was  engaged  in  calling  in  for 


5 

redemption  the  six  per  cent,  bonds  of  the  United  States,  and  investing 
the  proce  eds,  by  purchase  or  exchange,  in  the  five  per  cent,  bonds  of  the 
funded  loan,  under  the  act  of  July  14,  1870,  (16  Stat.  at  Large,  272.) 
For  that  purpose  it  had  an  agency  in  London,  conducted  exclusively  by 
officers  of  the  Department  who  had  been  sent  out  from  Washington. 
This  agency  was  made  use  of  to  facilitate  the  receipt  and  investment 
of  the  Geneva  Award  money. 

On  June  6,  1873,  a  call  was  issued  by  the  Secretary  of  the  Treasury, 
for  the  /redemption  of  twenty  million  five-twenty  six  per  cent,  bonds 
of  the  loan  of  1862.  It  was  the  fifth  call  for  the  redemption  of  bonds, 
and  matured  September  6,  1873,  three  months  from  the  date  of  its 
issue,  in  accordance  with  the  terms  of  the  act  of  July  14,  1870.  Four 
and  a  half  million  bonds  beyond  the  amount  required  for  investment  of 
the  award  money  were  called,  because  it  had  been  found  by  experience, 
that  many  bonds  of  every  call  were  not  sent  in  promptly  for  redemption, 
but  were  held  by  the  owners,  through  want  of  information  or  other- 
wise, until  long  after  maturity  of  the  call.  It  was  thought  that  of 
twenty  million  the  fifteen  and  a  half  million  would  be  redeemed  within 
the  three  months. 

Most  of  the  coupon  bonds  of  that  loan  were  held  in  Europe  and 
could  be  purchased  in  or  through  the  London  market.  On  the  day  of 
the  issue  of  this  call,  instructions  were  forwarded  to  the  Treasury 
agents  in  London,  that  if  parties  desired  to  deposit  with  them  called 
bonds,  or  matured  coupons,  (which  were  practically  the  same  as  coin,) 
to  the  credit  of  persons  in  this  country,  to  be  applied  in  payment  of 
money  payable  to  the  United  States  on  or  after  the  time  of  the  maturity 
of  the  call  of  that  date,  they  might  receive  the  same,  and  telegraph, 
from  time  to  time,  the  amount  so  received  and  the  names  of  the  parties 
to  whose  credit  the  deposits  were  made.  The  bonds  and  coupons  were 
to  be  cancelled  and  forwarded  to  the  Treasury  Department  at  Wash- 
ington at  the  earliest  possible  moment  after  receipt.  The  account  was 
not  to  be  mingled  in  any  way  with  that  of  the  receipt  of  bonds  and 
coupons  in  connection  with  other  funding  operations.  The  amounts 
payable  on  account  of  such  deposits  were  to  be  accounted  for  and  set- 
tled by  the  Treasurer  of  the  United  States,  at  Washington. 

At  the  same  time,  the  parties  who  were  understood  to  be  employed  by 
the  British  Government  to  make  the  transfer  of  the  Geneva  Award 
money  were  notified  of  these  instructions,  as  were  also  the  public  through 
the  journals  of  the  day.  Thereupon  those  parties  commenced  buying 
called  bonds  and  matured  coupons  and  turning  them  over  to  the  Treasury 
agents  in  London.  Before  the  expiration  of  three  months,  when  the 


6 

award  money  became  payable,  they  had  deposited  in  the  United  States 
Treasury,  either  directly  or  through  the  London  agency,  the  whole  fifteen 
and  a  half  million  dollars,  and  had  taken  coin  certificates  for  the  payment 
of  the  same,  in  different  sums,  from  time  to  time,  as  the  deposits  were 
made,  instead  of  drawing  the  coin  from  the  Treasury  in  payment  of 
their  bonds  and  coupons. 

On  September  9,  1873,  all  these  certificates  were  returned  and  can- 
celled, and  one  coin  certificate  for  the  full  amount  was  issued  to  the 
depositors,  and  made  payable  to  their  order.  This  they  indorsed  "  to 
the  joint  order  of  H.  B.  M.  Minister  or  Charge  d'Affaires  at  Washington, 
and  Acting  Cousul-General  at  New  York."  Those  officers,  Sir  Edward 
Thornton,  Minister,  and  Mr.  Archibald,  Consul-General,  indorsed  the 
same  to  the  Honorable  Hamilton  Fish,  Secretary  of  State,  at  the  State 
t  Department  in  Washington,  in  payment  of  the  Geneva  Award;  and 
payment  was  thus  consummated. 

Mr.  Secretary  Fish  then  indorsed  and  delivered  this  certificate  to  the 
Secretary  of  the  Treasury,  who  issued  to  him  therefor  one  five  per  cent, 
registered  bond  of  the  funded  loan  for  the  whole  amount.  There  were 
no  engraved  bonds  of  that  denomination,  of  course,  and  the  one  de- 
livered was  elegantly  written  out  with  a  pen,  in  exact  similitude,  orna- 
mentation and  all,  with  the  engraved  bonds  of  the  same  loan.  This 
bond  has  been  photographed  at  the  Treasury  Department,  and  many 
copies  have  been  called  for  and  furnished  to  persons  who  desired  to 
preserve  them  as  curiosities  connected  with  a  great  historical  event — 
the  settlement  of  the  "Alabama  Claims."* 

Thus  you  will  see  that  the  whole  business  was  done  without  the  pay- 
ment of  actual  coin  into  the  Treasury.  The  bonds  and  coupons  in 
Europe  were  bought  up  with  money  paid  there,  not  by  the  United 
States  Government,  and,  together  with  those  deposited  here,  were  re- 
deemed without  the  payment  of  money,  but  by  the  issue  of  coin  certi- 
ficates, which  were  paid  or  redeemed  in  a  bond  of  the  funded  loan. 
The  transaction  was  carried  on  so  gradually,  extending  over  a  period 
of  three  months,  that  its  effect  upon  exchange  or  business  was  too 
insignificant  to  attract  notice  of  any  kind,  if,  indeed,  it  had  any  effect 
whatever  upon  either  the  one  or  the  other. 

As  to  the  arrangements  between  the  British  Government  and  the 
parties  whom  it  employed  to  make  the  transfer  of  the  money  from 
London  to  Washington,  or  among  those  parties  themselves,  the  Treas- 
ury Department  here  had  no  concern  and  no  knowledge.  The  United 
States  employed  nobody  in  the  business  outside  of  their  own  officers, 

*  Copies  of  this  bond  aud  the  certificate  of  deposit,  with  the  indorsements  thereon, 
are  given  in  Mr.  Hackett's  book. 


and  they  paid  nothing  to  any  one  on  account  of  it.  They  profited  by 
the  operation  in  funding  fifteen  and  a  half  million  dollars  of  bonds 
drawing  six  per  cent,  interest  into  a  bond  drawing  only  five  per  cent, 
interest,  and  this  they  did  without  paying  commissions  or  incurring 
any  expenses  whatever. 

All  these  facts  are  matters  of  record  in  the  Treasury  Department, 
and  I  have  stated  only  what  can  be  found  there  by  diligent  search 
among  the  immense  archives  of  that  great  Department. 
I  am  very  respectfully  and  truly  yours,  &c., 

WILLIAM  A.  RICHARDSON. 
FRANK  W.  HACKETT,  Esq., 

Washington,  D.  C. 


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